Summary

A wave of challenges to mergers and acquisitions helped propel federal class-action securities filings to their highest point in 20 years, according to a report released on Tuesday.

The report, issued by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse, said that 270 securities class actions were filed in federal courts last year, 82 more than in 2015 and a 44 per cent boost above the 1997-2015 historical average.

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That helped drive some M&A transaction objections out of state court and into federal venues, contributing in part to the overall rise in filings last year, said John Gould, Cornerstone Research senior vice-president. Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, pointed to it as an example of plaintiffs’ lawyers looking to get their cases into friendlier jurisdictions.

“When the Delaware judiciary shuts the door on merger settlements that provide no measurable benefit for shareholders, they file in federal court by bringing claims that can’t be moved back to state court,” Mr Grundfest said. “This is rational forum shopping behavior by plaintiffs’ lawyers trying to maximize their returns.”